This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in
After a reasonably good response to the REC tax-free bonds, the next eligible company to come up with such an issue is Housing and Urban Development Corporation Limited (HUDCO). The company will be launching its issue from the coming Tuesday, September 17.
The rates the company is going to offer in this issue are higher than the rates offered by REC in its issue, which is still open and getting closed on September 16. There are two reasons for it, firstly, HUDCO issue is ‘AA+’ rated and that is why it can offer rates 10 basis points (or 0.10%) higher than any ‘AAA’ rated issuer. Secondly, the average G-Sec rates have been ranging higher in the past 10-20 days than they were earlier when REC came up with its issue.
As compared to REC’s 8.26% (10Y), 8.71% (15Y) and 8.62% (20Y), HUDCO is offering 8.39%, 8.76% and 8.74% rate of interest for the respective tenors.
Though the interest will be paid annually, I do not know the interest payment date as yet, as the final prospectus filed on September 11 is still not available on SEBI’s website, on BSE’s website, on HUDCO’s website and not even on any of the lead managers’ websites. It is quite disappointing for me not to have the prospectus available for public reference even three days prior to the issue opening date.
HUDCO is allowed to raise Rs. 5,000 crore from tax-free bonds this financial year, out of which it has already raised Rs. 190.80 crore through private placement. So, now it plans to raise the remaining Rs. 4,809.20 crore through this public issue, including the green-shoe option of Rs. 4,059.20 crore. The base issue size is Rs. 750 crore.
The official closing date of the issue is October 14 and the company may extend or preclose the issue, depending on the investors’ response to the issue.
There are many things which are common in this issue and the REC issue, so I will quickly state those features which are different in this issue.
Rating of the issue – CARE and India Ratings have assigned a rating of ‘AA+’ to this issue, which is also ‘Secured’ in nature. HUDCO is wholly-owned by the government of India, so the investors’ investment is quite safe.
Listing – HUDCO will get these bonds listed only on the Bombay Stock Exchange (BSE). The allotment and the listing will happen within 12 working days from the closing date of the issue. Investors can apply for these bonds either in physical form or in demat form, as per their comfort and requirement.
Interest on Application Money & Refund – The investors will get interest on their application money also, from the date of investment till the deemed date of allotment, at the same rate of interest as the applicable coupon rate is. Unlike REC issue which is to pay 5% p.a. interest on the refund money, HUDCO will pay the applicable coupon rate.
Categories of Investors & Basis of Allotment – The investors again have been classified in the following four categories and each category will have certain percentage of the issue reserved for the allotment:
Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue is reserved
Category II – Non-Institutional Investors (NIIs) – 20% of the issue is reserved
Category III – High Net Worth Individuals including HUFs, NRIs & QFIs – 30% of the issue is reserved
Category IV – Resident Indian Individuals including HUFs, NRIs & QFIs – 40% of the issue is reserved
QIBs portion had 20% of the issue reserved in the REC issue and after observing their response in that issue, their reserved portion has been reduced to 10% in this issue. Category III HNI investors will get this 10% share of the pie. NRIs are eligible to invest in this issue as well, on a repatriation basis as well as on non-repatriation basis. Qualified Foreign Investors (QFIs) are also eligible.
Minimum & Maximum Investment – There is no change in the minimum investment requirement of Rs. 5,000 i.e. at least 5 bonds of Rs. 1,000 face value each. Retail Investors’ investment limit stands at Rs. 10 lakhs, beyond which they will be considered as HNIs and will get a lower rate of interest.
Interest rates of this issue look very attractive to me. Earlier I used to say that the investors in the 30% or 20% tax bracket should consider these bonds, but now I advise investors even in the 10% tax bracket to go for these bonds. Though not strictly comparable, these bonds are attractive even against IIFL NCDs or Muthoot NCDs.
I think the way Indian rupee and the stock markets have recovered in the past 10 days or so, the G-Sec yields should also start falling soon. Going forward, I think the rates should not be higher than these HUDCO bonds, unless US Fed Reserve has something very dramatic in store for us in its meeting on September 17-18.
Link to Download the Application Form of HUDCO Tax-Free Bonds
If you need any further info or you want to invest in these bonds, you can contact me at +919811797407
Deemed date of allotment has been fixed as October 25, 2013. Interest will be paid on October 25th every year.
HUDCO tax-free bonds to get listed on the BSE on October 29th i.e. Tuesday.
Here are the BSE codes for the same:
8.39% 10-year bonds – BSE Code – 961784
8.76% 15-year bonds – BSE Code – 961785
8.74% 20-year bonds – BSE Code – 961786
Hi Shiv,
Though I applied through online route, it seems my application is rejected. How can there be any defect when it is applied online? Whom should I contact about this (ie my broker / Hudco directly)?
Regards,
Hi Raju,
Just wait for one more day and if you still don’t get it, then you should check it with your broker or the Registrar of HUDCO i.e. Karvy Computershare.
Thanks for quick reply. I already got the refund, so checked with my broker and he promised to get back soon.
Now the next question. When is this issue expected to get listed?
Regards,
Listing date is not announced as yet, but I expect the bonds to get listed on Wednesday.
Hi Shiv
This is the first site i check now for any tax free bonds related news and you have done a fantastic job in putting this blog together
I had applied for HUDCO tax free bonds using 2 applications. I now see that bonds applied through first application form is alloted and credited in my demat account. Cheque given for my second application is already encashed and i dont see any bond allotment for the same.
What is the process for getting the bonds for second application ?
Will the broker be able to fix this issue?
Will i get bonds or HUDCO will refund my money?
Thanks in advance for your response.
Regards
Ramadas
Hi Ramadas,
If their is no technical error in your second application, then I don’t see any reason for HUDCO to not allot any bonds against it. Just wait for a day or two and I think you’ll definitely get to know the exact status of your second application.
Any idea when the Hudco Bonds will be allotted / listed?
Most likely early next week.
The bonds have been credited to my demat a/c.
oh that’s great !!
Do you think HUDCO Tax Free Bonds allotment will come before Diwali ?
Definitely before Diwali.
when is the allotment?”
It should start happening any day now.
Can you tell us when HUDCO – 8.76 % Tax Free Bond Allotment is.
It is not announced as yet. You can expect it to happen between 7-10 working days from the issue closing date.
pls give your opinion about IIFCL/PFC & NHPC Tax Free Bonds along with their link so as to check monitor them on daily basis..( For subscription knowledge..)
how can we check them separately from the new tab each time ?
thanks for providing wonderful insight of the all the bonds…
Thanks Aryan for your kind words!
Here you have the links of IIFCL, PFC & NHPC issues:
http://www.onemint.com/2013/10/01/iifcl-8-75-tax-free-bonds-october-2013-tranche-i-issue/
http://www.onemint.com/2013/10/10/pfc-8-92-tax-free-bonds-october-2013-issue/
http://www.onemint.com/2013/10/14/nhpc-8-92-tax-free-bonds-october-2013-issue/
You can check my opinions about these issues at the end of these posts. Plz let me know if you have any specific query about any of the points.
Day 19 (October 14th) subscription figures:
Category I – Rs. 190.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 328.93 crore as against Rs. 961.84 crore reserved
Category III – Rs. 582.53 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1304.03 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,405.99 crore as against total issue size of Rs. 4,809.20 crore
Issue has got 50% subscribed to the total issue size on the last day.
Hi Shiv,
Thanks a lot for making this site a one-stop shop for all the investment related information – up-to-date on daily basis. Your frequent updates on each of the topics simplify the investors’ life…
As per your post HUDCO has got only 50% subscribed to the total issue size on the last day. In this scenario, is the issue closed or the company has extended the closure date?
Is it possible that HUDCO may come back with next tranch during the same Financial Year so to try and collect some more money, as the govt. approved limits/targets are still not achieved? If so, the ROI could be higher/lower depending on the prevailing market conditions at the time of issue, right?
Regards, cvs77
regards,
Chintan
Thanks a lot Chintan!
HUDCO issue has closed with 50% subscription and the rest 50% it may or may not raise from the public issue(s). It is totally HUDCO’s discretion.
Yes, the ROI could be higher/lower depending on the prevailing market G-Sec yields at the time of issue.
I would like to know the interest payment dates of HUDCo bonds.
Hi Srikrishnan,
Interest Payment Date of HUDCO bonds is yet to be announced. First payment will be made after one year from the deemed date of allotment. I think it should fall between October 21st and October 31st.
I would like to know which one good to invest ?
PFC OR NHPC ?
I have decided to split my investment in both of them. Rates for the tenure are same and both being PSU companies I don’t see much risk in either of them.
NHPC tax-free bond issue opens on October 18th. Coupon Rates are as under:
8.92% for 20 Years
8.79% for 15 Years
8.43% for 10 Years
The rates offered are absolutely same as the PFC rates. It is also rated ‘AAA’. The issue closes on the same date i.e. November 11th.
Day 18 (October 11th) subscription figures:
Category I – Rs. 135.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 324.76 crore as against Rs. 961.84 crore reserved
Category III – Rs. 575.32 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1258.89 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,294.47 crore as against total issue size of Rs. 4,809.20 crore
Day 17 (October 10th) subscription figures:
Category I – Rs. 135.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 323.41 crore as against Rs. 961.84 crore reserved
Category III – Rs. 565.63 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1230.55 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,255.09 crore as against total issue size of Rs. 4,809.20 crore
Day 16 (October 9th) subscription figures:
Category I – Rs. 125.50 crore as against Rs. 480.92 crore reserved
Category II – Rs. 320.66 crore as against Rs. 961.84 crore reserved
Category III – Rs. 555.98 crore as against Rs. 1,442.76 crore reserved
Category IV – Rs. 1199.47 crore as against Rs. 1,923.68 crore reserved
Total Subscription – Rs. 2,201.61 crore as against total issue size of Rs. 4,809.20 crore
Hi Shiv – Many Thanks for the update. When can we expect your analaysis / recommendation on the PFC issue?
Hi Jitendra,
I am working on that only. I hope to post it by late evening today.
Here you have it – http://www.onemint.com/2013/10/10/pfc-8-92-tax-free-bonds-october-2013-issue/
PFC Tax-Free Bonds Issue opens on October 14th. Coupon Rates are as under:
8.92% for 20 Years
8.79% for 15 Years
8.43% for 10 Years
Dear Shiv,
Can we expect better interest rates in NHPC and PFC issues.
Dear Akhilesh,
PFC issue should hit the markets before NHPC issue and as per my observation, its rates should be higher by around 10-20 basis points than the IIFCL rates.
pls send me daily subscription figures of IIFCL tax free bonds like HUDCO bonds…
Thanks for great information with daily updates…
Hi Aryan,
You may leave a comment on the IIFCL post and you’ll get the required info.